The road ahead
Until recently, driverless vehicles have been mostly dismissed as fodder for Hollywood. In fact, several major US automobile manufacturers have been incrementally developing these systems since the 1940s, and some vehicles today have semi-autonomous capabilities, ranging from in-vehicle navigation and global positioning system (GPS) technology to advanced driver assistance systems (ADAS), which include automatic self-parking and collision avoidance.
Fully autonomous vehicles - also referred to as self-driving or driverless cars - allow passengers to travel between points without the need for human input or control. The advent of autonomous vehicles dates back to the mid-1900s, when original equipment manufacturers (OEMs) like Ford and GM began making prototypes and displaying them in exhibits like the 1940 World’s Fair.
Since then, technological advancements, particularly over the last 10-15 years, have allowed the pace of autonomous system development to increase significantly. As a result, most major OEM’s have further developed and integrated these semi-autonomous capabilities in their fleets today. Among those functions are adaptive cruise control, blind-spot detection, lane departure warning and automatic braking.
In order to achieve full autonomy, vehicles will need to be outfitted with a new set of sophisticated technology, of which many components already exist or are fairly advanced in development. In order to drive themselves, cars will need to be equipped with a sophisticated set of devices, including LIDAR (a combination of laser/light and radar), sensors, cameras, GPS and more to form a buffer around the car. This sensory buffer will facilitate vehicle-to-vehicle communication and vehicle-to-infrastructure communication, which are both foundational pieces required to reach full autonomy and are especially critical to ensure safety, reliability and practicality.
The advent of the driverless car has the potential to bring a number of social and economic advantages.
In addition to affording passengers with more time to read, work and/or relax, the primary areas that most drivers will benefit from are the economic savings afforded by autonomous vehicles, including:
- Accident costs
- Productivity gains
- Fuel costs
Driverless cars are expected to result in fewer accidents. According to insurance provider Lloyd’s, citing a study from the Center for Internet and Society at Stanford Law School, approximately 90% of road traffic accidents are caused by human error.3 By eliminating the human input element of motor vehicle operation, many pundits project that collision rates will decrease dramatically.
According to calculations from Morgan Stanley, which include cost per accident, cost per death, total motor vehicle deaths and injuries from motor vehicle estimates, it is projected that the total cost of vehicle-related accidents in the US is US$542 bn. If autonomous vehicles eliminate 90% of those accidents, the savings would translate into approximately US$488 bn and approximately 36,000 lives each year.
One often-overlooked benefit of driverless cars is the mobility it would provide to elderly and disabled people. Autonomous vehicles would enable these individuals to better manage their lives with less dependence on other individuals, making everyday trips considerably easier while restoring dignity.
From an economic standpoint, the mere fact that the use of driverless cars promises productivity time increases will have a positive economic impact. Morgan Stanley estimates autonomous cars will ultimately result in over US$1.3 trillion in savings every year for the US economy, which represents approximately 8% of US GDP. Extrapolated on a global level, those savings amount to $5.6 trillion per year.2
Fuel-cost savings could be considerable because cars will be capable of managing fuel consumption through more efficient driving, while advancements in engine and transmission technologies will compound the fuel benefits.
These benefits are certainly exciting advancements and fuel optimism the driverless motoring dream can become reality, but there are still a few challenges to overcome before full autonomy is achieved.
The issue of liability and who accepts responsibility in the case of an accident remains a primary concern for legislators and government. Other issues that will need to be tackled include setting parameters for who is allowed - or licensed - to operate the vehicle, while also addressing security and privacy concerns about the information contained in the vehicle’s technology as it relates to the passengers and occupants.
One barrier to full adoption will be the initial reluctance and trepidation people have trusting a car to handle all aspects of their driving experience. As happened with the advent of most other modern convenience technologies, we believe this barrier will quickly pass, once people realise the benefits and become accustomed to semiautonomous features.
Despite the various challenges this sector poses, we believe the automobile industry’s gradual shift toward autonomy is a foregone conclusion and presents particularly strong development potential for OEMs, suppliers and technology companies. The advantages and benefits of this technological evolution are considerable, and many technologies, like GPS, have already been implemented in mass-produced vehicles today. While there are still hurdles to overcome before fully driverless cars are the preferred mode of transportation, those that remain are challenging but not entirely insurmountable.
It will be especially critical for government officials, OEMs, insurance providers and others to collaboratively address issues like liability and legislation so they do not derail the move to autonomy. Nevertheless, we are confident that many, if not all, of the challenges will be resolved as people realise how transformative and beneficial these automobiles will be and are optimistic the adoption timeline illustrated below is achievable. As we move along the spectrum toward fully autonomy, we expect many questions will be answered, and during this move, the economic winners and losers in this sector will ultimately emerge.
1. Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited ("BNYMIM EMEA") or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.
2. Smith, Bryant Walker. “Human error as a cause of vehicle crashes”, Center for Internet and Society. 18 December 2013. http://cyberlaw.stanford.edu/blog/2013/12/human-error-cause-vehicle-crashes. Link accessed: 21 January 2015.
3. Shanker, Ravi, et. al. Autonomous Cars: Self-Driving the New Auto Industry Paradigm. Morgan Stanley Blue Paper. Morgan Stanley & Co. LLC. 6 November 2013.